The U.S. Department of Agriculture in its latest report estimated the U.S. corn crop to be 13.0 billion bushels, which is 8 percent higher than the 2008 crop. This is based on conditions as of Oct. 1, suggesting an average yield of 164.2 bushels per acre, which is 10.3 bushels above last year.
This would be the highest yield on record and total production would be second only to the record set in 2007. Soybean production is forecast at a record high 3.25 billion bushels. This would be up 10 percent from last year. Yields are expected to average 42.4 bushels per acre, up 2.7 bushels from 2008.
This would be the third highest yield on record. Clearly the cooler, wet weather did not have a negative impact on nation’s corn and soybean crops.
The current wet, cold weather is challenging harvest and it is not a crop until it is in the bin. Waiting to harvest a big crop can test the patience of producers and all who await the grain to fill the marketing channels.
We don’t like to wait around and watch a year’s worth of labor, capital and risk being held captive by Mother Nature. When it comes to weather, we are not in control and that can be rather humbling. It is during times like these that we can focus on the things that we can control.
While no one knows what the markets will do, we do know what the prices are today. We cannot control the markets or the weather; we can only try to manage the risk and opportunities presented. If we can manage the margins in our operations, we can often avoid losses of equity. The management of equity is the pathway toward financial strength that can offer financial security.
Watching a Twins game the other night, I remembered my Grandpa telling me that hitting home runs in baseball makes you feel great. “Son, if you are going to swing for the fence, you will strike out more times than not!” He would ask me how it felt to strike out.
Then he would quietly tell me that I could win more ball games hitting singles and doubles than home runs. Willie Mays was my hero, so I would still swing for the fence.
As the years have gone by, I now understand what my Grandpa was trying to teach me. In grain marketing, many times we want to hit the home run and sell at the top of the market. Many times when we take this approach we find ourselves striking out and selling at prices that may be significantly lower after the rally.
If we can manage our margins in such a way as to make sales above our cost of production, we are hitting those singles and doubles that add up to runs scored. I now know the grain angle that Grandpa was teaching me, was to work on my batting average rather than the home runs.
Grain Angles is written by Tom Neher, AgStar Financial Services vice president of agribusiness and grain specialist from Rochester, Minn.
